SHANGHAI, Feb 24 (SMM) – At the online market live conference hosted by SMM, Liu Xiaoyi, SMM senior analyst of new energy industry, shared her review and forecast on the supply and demand of China's lithium market in the first quarter of 2022. According to Liu, driven by the slow production of lithium mines and the high growth rate of new energy market demand in 2021 and 2022, the prices of lithium carbonate and lithium hydroxide will rise all the way, and then the lithium salt prices will pull back slightly after the downstream demand is met by the increasing capacities.
1. Development analysis of global and Chinese new energy vehicle and lithium battery industries
SMM data shows that the global new energy vehicle (NEV) sales totalled 6.79 million units in 2021, a year-on-year increase of nearly 114%. The sales in China stood at 3.54 million units, with a penetration rate of 13.4%. Driven by the support of national policies, the layout and investment of battery companies and car companies, and the increasing acceptance of new energy vehicles by consumers, the total sales of NEVs in the world will are expected to be 18.35 million units by 2025, and the penetration rate of China’s NEV market will increase to 30%.
1. The market shares of LFP battery is increasing in 2021-2023 owing to its high cost effectiveness and safety performance. The NCM battery and LFP battery will penetrate into various market segments according to their technical characteristics in 2024-2025.
The LFP batteries are safer and more cost effective, while the NCM batteries have higher energy density and better performance in low temperatures.
According to SMM's previous statistics, the growth rate of lithium-ion battery output in China is estimated at 38% from 2018 to 2021.
2. The demand for LFP will explode in the energy storage market in the future, and China’s LFP market is expected to expand significantly from 2022.
The market share of LFP battery is expanding in the motive power industries (especially in the passenger car market and overseas market). In the energy storage field, the demand for LFP from domestic power generation and grid industries is expected to increase, thanks to its better cycle performance and improved low temperature performance. Besides, the demand from the overseas household energy storage field will increase.
3. Judging from the current domestic battery technologies, the energy density is trending higher. In the future, the combination of high-nickel NCM battery and solid-state battery will further consolidate the high-nickel trend with stronger safety performance and higher energy density.
4. The increase in lithium demand mainly comes from electric car and energy storage industries, and the traditional industrial demand remain stable for a long time. The demand by LFP will rise sharply.
In 2021, the demand by NCM accounted for 59% in the total demand for lithium, and that of LFP accounted for 21%. As the market share of LFP battery is expanding rapidly, the proportion of demand by LFP is expected to rise to 30% by 2025, and that of NCM materials may shrink to around 56%.
2. Analysis and prospect of the supply and demand of China's lithium salt market in the near future
The lithium prices surged in 2015 when the supply of lithium concentrate grew more slowly than increase in demand. Then the prices fell for three years during 2017-2019. During 2021-2022, the lithium prices broke through new highs.
The lithium prices dropped most significantly in 2019 mainly due to the excessive growth in the supply of lithium concentrate. The lithium prices started to rise in H2 2020, and kept rising in 2021. On the raw material side, global lithium concentrate supply was tight due to the limited production capacity. On the demand side, the LFP market was booming, and the proportion of installed capacity surpassed that of NCM, which formed a strong impetus for the demand for lithium carbonate, driving up the prices. At the same time, the overseas high-nickel market started to expand, but the growth was not as fast as the LFP market. The lithium hydroxide prices were lower than lithium prices.
China's lithium resources are more diverse than that in overseas countries.
There are three main types of lithium resources in the world: spodumene, salt lake and lepidolite, and China has all these three types of lithium resources.
The global supply of lithium resources is expected increase by 26% in 2022, as the capacity of lithium extraction from salt lake as well as spodumene will rise simultaneously. However, the mainstream capacities have already been bound to certain users, and the market will see few spots.
The global supply of lithium resources in 2022 is expected to stand at approximately 740,000 mt of lithium carbonate equivalent. The output of spodumene concentrate will be about 325,000 mt LCE, a year-on-year increase of 36%, and the output of lithium extracted from salt lakes will be about 288,000 mt LCE, a year-on-year increase of 34%.
On the raw material side, China's spodumene concentrate supply was in significant shortage in 2021, and is likely to remain tight in 2022, which will push up the prices.
China's lithium smelters are mainly distributed in Shandong, Jiangxi, Qinghai and Sichuan. Among them, the smelters in Jiangxi mainly extract lithium from spodumene; the smelters in Qinghai, Tibet and other regions mainly extract lithium from salt lakes; the smelters in Tibet, Shandong, Jiangxi, and Jiangsu mainly extract lithium from lepidolite.
The supply of lithium carbonate has been tight since July 2021, and the supply gap has expanded in Q1 2022 as the lithium salt enterprises conducted maintenance around the Chinese New Year.
The demand for LFP has been standing high during H2 2021 - Q1 2022. While the operating rates of LMO producers dropped sharply due to the high costs, and its demand for lithium carbonate declined.
The demand for lithium carbonate in the NCM material market is relatively stable.
Summary
The demand for lithium hydroxide in the new energy market is expected to grow rapidly during 2021 - H2 2022, while the capacities of lithium concentrate will be put into production slowly, and the shortage of raw materials may keep driving up the lithium hydroxide prices. The lithium salt prices may pull back slightly later as the overseas mines will put new capacities into production.
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